How PO Financing Eases Cash Flow

When businesses experience a cash flow problem, it can negatively affect them in a number of ways. Customers must wait for orders or may move on to competitors, and a lack of new profit only causes a deeper plunge into debt. Business owners who are experiencing cash flow problems and cannot secure a bank loan should consider PO financing as a solution.

Funds Can Be Secured for a Variety of Needs  

When a company secures PO financing, a purchase order lender assures a customer’s good credit, secures a line of credit with a business’ supplier, and then gives the business the money it needs for a variety of costs. When the transaction is complete, the lender collects its money from the customer. This frees up cash that can be used elsewhere within the company. For example, if a startup is experiencing growth but the owner finds him or herself lacking the cash to fill a large order for a customer, purchase order financing can provide funds for third-party manufacturing, shipping costs, supplies and funds that support the daily needs of the business. As a result, growth capital is generated and cash flow increases.

Businesses Can Take Advantage of New Opportunities

Businesses that have cash flow problems tend to experience a slow growth because funds are not usually available when opportunities for growth present themselves. Consider a startup company that distributes organic pet treats and is experiencing a temporary cash flow problem because a large chunk of its assets is being spent on growth and expansion. If a national pet supplies chain was to inquire about placing a large order, the business may have to turn it down and lose the chance for considerable growth. However, if the business were to secure purchase order financing, funds would become available and the company would be able to fulfill the order, generating profit and eliminating the cash flow issue.

Businesses Create Profit, Not Debt

Cash flow problems are resolved when a company can generate consistent profit without losing any equity. This is where PO financing may be a good choice for a business that is on the verge of growth because unlike a bank loan, there is no interest attached to the financing. While the business may have to pay additional fees during the transaction, when the lender returns the remainder of the profits back to the business after collecting its money, that profit will not be eaten up by interest and other fees often attached to traditional bank loans. As a result, the profit made will ease the company’s cash flow problem.

Cash flow issues within a business often happen without warning. However, securing PO financing can ease these issues and loosen cash flow for increased success and greater profits.